The Indian Supreme
Court, on Wednesday, upheld the provisions of the Prevention of Money
Laundering Act (PMLA), 2002. The judgement was given by a bench of Justices AM
Khanwilkar, Dinesh Maheshwari and CT Ravikumar on a batch of 241 petitions
challenging certain provisions of the PMLA.

The Supreme Court upheld
the constitutionality of the provisions of the PMLA that relate to the powers
of the Enforcement Directorate (ED), its power of arrest, attach, search and
seizure and also upheld the reverse burden of proof under Article 24.

Additionally, the
apex court also upheld the “twin conditions” of bail in Section 45 of the PMLA.

ECIR is not
FIR

The three-judge
bench held that providing of Enforcement Case Information Report (ECIR) is not
mandatory since it is an “internal document” and not the same as an FIR (first
information report). Therefore, the Supreme Court ordered that supply of ECIR to
accused is not mandatory and only disclosing the reasons during arrest is enough.
The court said the ED manual too is not to be published since it is an internal
document.

Section 3 of
PMLA

Section 3 of the
Prevention of Money Laundering Act (PMLA) was one of the contested questions in
the petition before the Supreme Court [Vijay Madanlal Choudhary vs Union of
India]. Section 3 of the PMLA reads:

Offence of money-laundering. —Whosoever directly or
indirectly attempts to indulge or knowingly assists or knowingly is a party or
is actually involved in any process or activity connected with the proceeds of
crime and projecting it as untainted property shall be guilty of offence of
money-laundering.  

To this, the
Supreme Court said: “We are clearly of the view that the expression “and” occurring
in Section 3 has to be construed as “or,” to give full play to the said provision
so as to include “every” process or activity indulged into by anyone.

Therefore, the
projecting of property as untainted would constitute money laundering on its
own being an independent process or activity. “The interpretation suggested by
the petitioners that only upon projecting or claiming the property in question
as ‘untainted property’ that the offence of Section 3 would be complete, stands
rejected.”

The court further
clarified that offence under Section 3 depends on illegal gain of property as a
result of criminal activity relating to a scheduled offence.

On Section 5

Section 5 of the
Prevention of Money Laundering Act (PMLA) deals with attachment of property.
The Supreme Court said: “It (Section 5) provides a balancing arrangement to
secure the interests of the person as also ensures that the proceeds of crime
remain available to be dealt with in the manner provided under the Act. The
procedural safeguards as delineated are effective measures to protect the
interests of the persons concerned.”

On Section 24

While the
petitioners argued that the burden of proof should lie with the prosecutor, the
Supreme Court observed that Section 24 has reasonable nexus with the objectives
and purposes of the law.

Further, the apex
court also made observations on Section 44, 45, 50 and 63.

Central
government’s position

The Union government argued
before the Supreme Court that the offence of money laundering under Section 3
is a standalone offence so long as there is a predicate offence irrespective of
whether there is acquittal or conviction in such a predicate offence.